Activity-Based Costing in the Portuguese Telecommunications Industry

Activity-Based Costing in the Portuguese Telecommunications Industry

Maria Major (ISCTE – Business School, Portugal) and Trevor Hopper (University of Manchester, UK)
DOI: 10.4018/978-1-60566-986-1.ch047
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Abstract

This chapter examines an implementation of an Activity-based Costing (ABC) system in a Portuguese telecommunications firm called Marconi. It is argued that they changed its management accounting system due to efficiency and institutional pressures from its constituencies following the liberalisation of the Portuguese and European Union telecommunications market. The replacement of Marconi’s “old” management cost accounting system by an ABC system popularised by the business mass media and consultants as a “progressive” management accounting tool, helped display expectations of dynamism and efficiency to important external institutions, such as regulators. Whilst it was used and welcomed by managers dealing with commercial matters, operational managers were more unconvinced and contributed to technical problems affecting its accuracy and operation. The divided reactions of the managers give support to both advocates of ABC and its critics who claim it is beset with problems of economic measurement, behavioural issues during implementation and operation, and questionable cost-benefit returns.

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